Baking & Snack - July 2015 - 22

CO-MANUFACTURING CONSIDERATIONS

Co-manufacturers can be more flexible than their customers because their
production lines are designed with quick changeovers in mind.
manufacturers allow them to build upon that strength.
They rely upon co-manufacturers when production may
dilute that effort."
As new products continue to push the boundaries of
snacks and baked goods and the market continues to
change increasingly fast, co-manufacturers will only become more integral to the food industry's need to meet
consumer demand and keep things fresh.
"It's strategic for larger customers; they rely more
on external manufacturing than they ever have before
as an essential arm of their manufacturing capability,"
said Byron Goulding, president and CEO, Oak State
Products, Wenona, IL. "Co-manufacturers can be more
nimble and react to changing market dynamics faster
than larger food companies, so I can see a continuing
and increasing strategic reliance on co-manufacturing."

Passing off the pressure
Outsourcing production to another company is nothing
new to the baking and snack industries and can be the
right choice for many different reasons.
Co-manufacturers can simply take on extra capacity for a bakery or snack company that has maxed out
its own capacity. They can also make new products for
start-up companies and existing larger ones, which may
not be ready to splurge on the investment in new equipment and facilities for a risky new product or something
completely unlike what they already produce. "If it is a
large-volume item, large companies will typically do the
production themselves in-house where they can do it
efficiently," Mr. Van Laar said. "But on smaller-quantity

22 Baking & Snack July 2015 / www.bakingandsnack.com

items and start-up items, it is more feasible from an economic standpoint and a quick-to-market standpoint to
use a co-manufacturer."
This is because co-manufacturers tend to have flexibility that larger companies do not.
"We can do it faster and be more flexible because
we're geared to doing a lot of
different things whereas they are geared toward making one, two or three SKUs very efficiently and effectively," said Rich Scalise, chairman and CEO, Hearthside
Food Solutions, Downers Grove, IL. "But they're not designed to do the smaller SKUs or the unique things."
This is possible, according to Mr. Scalise, because comanufacturers aren't necessarily as automated as the
larger companies they call customers. While Hearthside
Food Solutions definitely employs automated production, its automation is designed to make many different
products with a labor force to match, not the kind of automated production line dedicated to make one product
for days on end.
Some businesses, often referred to as virtual companies, want nothing to do with manufacturing at all. These
virtual companies come to co-manufacturers with an
idea for a product and give the production over to those
more experienced in that area. "Branded companies are
really good at marketing and selling, and depending on
the company, they want to focus on what they're good
at," Mr. Goulding explained. "By off-loading the manufacturing, it doesn't defocus their company and keeps
them focused on their marketing efforts."
Virtual companies often rely on co-manufacturers not
just for the manufacturing piece but also assistance in
R&D and technical services. Co-manufacturers with a
staff of food scientists and an R&D department can pro-

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